Assume the Interest Rate in the Market for One-Year Zero-Coupon

Multiple Choice

Assume the interest rate in the market for one-year zero-coupon government bonds is i = 8 per cent and the rate for one-year zero-coupon grade BBB bonds is k = 10.2 per cent. What is the implied probability of repayment on the corporate bond (round to two decimals) ?

A) 2.00 per cent
B) 2.04 per cent
C) 97.96 per cent
D) 98.00 per cent